Compañía De Minas Buenaventura: Decent Production For Q2 2022 (NYSE:BVN)

Introduction

The Lima-based Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) released its second-quarter 2022 production results on July 15, 2022. The company also updated its FY 2022 guidance.

Note: BVN is Peru’s largest publicly traded precious metals miner and the most important holder of mining rights in Peru. It produces gold, silver, lead, zinc, and copper. I have been following BVN since 2020 on Seeking Alpha, and this article is an update of my article published on May 9, 2022.

1 – Investment Thesis

The investment thesis has not changed since the preceding article. BVN is a strong miner that I consider a good investment for the long term due to its metal diversification and solid balance sheet.

However, the political situation in Peru after the election of leftist President Pedro Castillo is becoming complicated. It should play a role in your decision to invest in this miner.

The Fed is about to hike again by most likely 75-point to fight record inflation, which may push the world economy into a recession. This possible economic slowdown is not the best environment for a bullish market for precious and industrial metals.

Thus, one winning strategy that I often recommend in the gold sector in my marketplace, “The Gold and Oil Corner,” is trading about 50%-60% LIFO of your whole BVN position and keeping a core long-term position for a much higher target. It is the centerpiece of my marketplace, protecting you from unwelcome “surprises.”

However, only U.S. investors can trade LIFO, whereas other investors could find a way around it. Please read the note at the end of the article.

2 – Stock performance

BVN is down 31% on a one-year basis. The stock has dropped precipitously since April 2022 after fearing a recession due to high inflation started to harm the metal industry.

3 – Gold production (100%) Details – Total production was 61,254 Au Oz and 1,880,500 Ag Oz in 2Q22.

The company operates seven mines in Peru: Tambomayo, Orcopampa, Uchucchacua (suspended, see below status), Julcani, El Brocal, La Zanja, and Coimolache.

Also, the Company owns 19.58% of Sociedad Minera Cerro Verde, a significant Peruvian copper producer (a partnership with Freeport-McMoRan Inc. and Sumitomo Corporation).

3.1 – Detailed Table by metals in the 2Q22 compared to the 1Q22

Mine 100%	Gold 1Q22	Gold 2Q22 Oz	Silver 1Q22 Oz	Silver 2Q22 Oz	Lead 1Q22 MT	Lead 2Q22 MT	Zinc 1Q22 MT	Zinc 2Q22 MT	Copper 1Q22 MT	Copper 2Q22 MT
Orcopampa	19,031	17,749	0	0	0	0	0	0	0	0
Tambomayo	13,867	14,351	419,396	433,820	2,509	2,823	3,543	3,920	0	0
La Zanja	5,900	4,767	0	0	0	0	0	0	0	0
Coimolache	19,512	19,930	0	0	0	0	0	0	0	0
El Brocal	4,350	4,457	1,059,666	806,123	2,497	1,306	8,772	4,146	10,159	10,537
Julcani	0	0	661,132	640,557	0	0	0	0	0	0
Total	62,660	61,254	2,140,194	1,880,500	5,006	4,129	12,315	8,066	10,159	10,537
Production sold (see note)	–	58,229	–	1,771,895	–	3,718	–	6,632	–	10,311

Note: The Uchucchacua mine provided some metal production sold.

1. At the Tambomayo mine, gold, lead, and zinc production exceeded expectations due to an increase in grade and metallurgical recovery, pushing the company to update guidance.
2. Orcopampa mine also exceeded expectations due to higher gold grades and better results in treating ore.
3. At the Coimolache mine, the production was stable.
4. At La Zanja, production is insufficient, and inflationary pressure has accelerated the company’s decision to put the mine under care &maintenance by 4Q22.
5. At the Julcani mine, silver production was in line with expectations.
6. At the Uchucchacua mine, exploration continues to resume mine development during 3Q22, targeting production restart by 2H 2023.
7. The El Brocal mine had a stable production at the underground mine at a rate of 8,000 tpd. 2Q22 copper production was in line with expectations. However, Tajo Norte’s silver, zinc, and lead production were below expectations during the quarter due to a change in the mine plan.

3.1.1 – Gold Production on a 100% basis. (Au Oz)

Gold production on a 100% basis was 61,254 Au Oz during the second quarter of 2022 compared to 62,660 Au Oz in 1Q22.

3.1.2 – Silver Production on a 100% basis (Ag Oz)

Silver production on a 100% basis was 1,880,500 Ag Oz during the second quarter of 2022 compared to 2,140,194 Ag Oz in 1Q22.

3.1.3 – Base Metals consolidated. (Metric Tonne = 2,204.6 pounds)

Lead production was 4,129 MT in 2Q22 compared to 5,006 MT in 1Q22

Zinc production was 8,066 MT in 2Q22 compared to 12,315 MT in 1Q22.

Copper production was 10,537 MT in 2Q22 compared to 10,159 MT in 1Q22.

4 – Guidance 2022 updated

Note: Buenaventura has updated its 2022 production guidance ranges, and the revisions mainly were upwards, except for the El Brocal operation.

Mine 2022 Guidance	Gold	Silver	Lead	Zinc	Copper
Tambomayo	48K oz-53K oz	1.8 Moz-2.4 Moz	6.0K-8.0K	16.0K-20.0K	–
Orcopampa	65K-70K	–	–	–	–
Coimolache	80K-85K	–	–	–	–
La Zanja	37K-45K	–	–	–	–
Julcani	–	2.2 Moz -2.5 Moz	–	–	–
El Brocal	12K-15K	3.0 Moz – 3.5 Moz	5.0K-6.0K	16.0K-20.0K	40.0K-45.0K

Technical Analysis (Short Term) and commentary

Note: The chart is adjusted for the dividend.

BVN forms a descending channel pattern with resistance at $8.3 and support at $5.75. I recommend selling between $8.25 and $8.65 and buying back between $5.60 and $5.80. The RSI is now at 34, close to an oversold situation.

The overall strategy that I usually promote in my marketplace, “The Gold and Oil Corner,” is to keep a core long-term position and use about 50%-60% to trade LIFO while waiting for a higher final price target to sell your core position at or above $12-$14.

It is essential to pay attention to the 50MA that could play a mid-resistance, and I suggest selling about 20% at $7.50.

Note: The LIFO method is prohibited under International Financial Reporting Standards (IFRS), though it is permitted in the United States to generally accepted accounting principles (GAAP). Therefore, only U.S. traders can apply this method. Those who cannot trade LIFO can use an alternative by setting two different accounts for the same stock, one for the long term and one for short-term trading.

Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.

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